Before embarking on the journey of purchasing a property in India, it is imperative to comprehend the intricate web of real estate laws and regulations governing the nation. The landscape of real estate in India is shaped by both state and central laws, each playing a crucial role in every property-related transaction.
In this comprehensive guide, we will delve into the various facets of Indian real estate laws, covering essential acts and regulations that every potential homebuyer should be well-versed in.
The Foundation: Real Estate Laws in India
Real estate laws in India are dynamic and subject to changes made by both state governments and the central government. The Property Act, a cornerstone of these laws, defines immovable property, encapsulating land, its benefits, and anything permanently attached to it. The Real Estate Regulatory Authority (RERA) assumes a pivotal role, overseeing the marketing, sale, and development of real estate projects across the country.
The constitutional definition of “land” further accentuates the complexity of property laws in India. The 7th Schedule of the Constitution categorizes land in the State List, allowing only state legislatures to govern land agreements. Simultaneously, contracts related to non-agricultural land fall under the Concurrent List, enabling the central government to legislate on these matters.
Luxury realtor and social media content creator with over 273k followers on Instagram, Snehil Yadav says, “This constitutional framework results in a multitude of real estate laws, making it imperative for prospective homebuyers to navigate this legal landscape before making any decisions.”
Key Real Estate Laws in India
Registration Act, 1908 and India Stamp Act, 1899
The Registration Act, 1908, and India Stamp Act, 1899, serve as the bedrock for registering deeds, instruments, and documents related to the transfer of immovable property. These acts ensure meticulous documentation and adherence to stamp duty payments, a crucial aspect of property transfers.
Real Estate Regulatory Authority or Real Estate Regulation and Development Act (RERA), 2016
The RERA Act of 2016 is a milestone in real estate regulation. It oversees the marketing, sale, and development of real estate projects, placing a strong emphasis on safeguarding the interests of property buyers. Developers are obligated to register their projects under RERA, with state-specific authorities ensuring compliance and implementation.
Rehabilitation and Resettlement Act, 2013
Regulating land acquisition by the government, the Rehabilitation and Resettlement Act of 2013 outlines the procedures and rules for granting compensation, rehabilitation, and resettlement to affected individuals. This act provides a legal avenue for beneficiaries dissatisfied with the compensation they receive.
Transfer of Property Act, 1882
Central to the ownership of immovable assets, the Transfer of Property Act, 1882, governs various transactions, including loans, exchanges, gifts, mortgages, and leases. Any property transaction involving a seller and a buyer falls under the purview of this act.
Indian Contract Act, 1872
The Indian Contract Act of 1872 governs contracts in India, covering aspects such as execution, implementation, remedies, and breach of contracts. Sections integral to property transactions within the Transfer of Property Act are an integral part of this broader legal framework.
Foreign Exchange Management Act, 1999
Introduced for non-residents of India, the Foreign Exchange Management Act (FEMA) addresses foreign investments in the real estate sector. It aligns with the Foreign Direct Investment (FDI) policy, overseeing and regulating foreign investments in Indian real estate laws.
Special Considerations: Can an NRI Buy a Residential Property in India?
Understanding the nuances of property ownership for Non-Resident Indians (NRIs) is crucial. NRIs and Indian-origin foreign nationals can own residential properties in India inherited by them. However, non-Indian foreign nationals are restricted from purchasing housing properties. These regulations extend to both residential and commercial properties, emphasizing the importance of clarity for foreign entities.
Diving Deeper: State-Specific and Central Laws
The complexity of India’s real estate legal landscape stems from a combination of state-specific and central laws. The constitutional definition of ‘land’ places it under the State List, while matters related to the transfer of property and contracts fall under the Concurrent List. This dual jurisdiction results in a diverse array of laws governing real estate in India.
Indian Stamp Act, 1899 and Registration Act, 1908
These acts regulate the registration of deeds, instruments, and documents related to the transfer of interest in immovable property. Compliance with these laws is essential to validate property transactions and ensure the proper payment of stamp duty.
Real Estate (Regulation and Development) Act, 2016 (RERA)
RERA, a central act, governs the development, marketing, and sale of real estate projects. It mandates the registration of all real estate projects under its purview and establishes an adjudicating mechanism for dispute resolution. Many states have adopted corresponding RERA regulations to enforce the central act locally.
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013
This act ensures fair compensation and transparency in cases of land acquisition by the government for public or corporate purposes. It outlines the compensation and rehabilitative measures to be taken in such scenarios.
Transfer of Property Act, 1882
A central act, the Transfer of Property Act, 1882, lays down general principles governing ownership of immovable assets. It covers various aspects such as exchange, sale, lease, mortgage, and gift of property.
Indian Easement Act, 1882
This act allows property occupiers to utilize the property for a specific period, despite not possessing it. It delves into the intricacies of non-possession of a property despite its use.
Indian Contract Act, 1872
Governing contract laws in India, this act covers the capacity to enter into a contract, its execution, implementation, breach, and available remedies. Sections related to contracts within the Transfer of Property Act are treated as part of this broader legal framework.
Land Revenue Codes
Many states have formulated their own land revenue codes, covering regulations related to land revenue, tenancy types, agricultural land holding, and other associated matters. These codes address division and classes of immovable property, transfer restrictions, duties and powers of revenue officers, and rules and penalties for violations.
Beyond the Basics: Additional State and Local Laws
In addition to the core real estate laws discussed above, Indian real estate is subject to various state, local, municipal laws, customs, and policies. These cover aspects such as slum rehabilitation and redevelopment, rent control, urban development, property tax, ownership of property, Special Economic Zones (SEZs), land pooling, land ceiling, land zoning, and land use. A comprehensive understanding of these laws is essential for navigating the nuanced terrain of real estate in India.
Purchasing a property in India involves navigating a multifaceted legal framework governed by a plethora of state and central laws. A thorough understanding of these laws is not only advisable but essential for anyone considering a real estate investment.
As the Indian real estate sector continues to evolve, staying abreast of legal developments and seeking professional guidance can significantly enhance the property-buying experience, ensuring a secure and legally sound investment.